updated 12:45 pm EDT, Tue May 25, 2010

Microsoft overhauls devices group to face iPhone

Microsoft on Tuesday confirmed executive departures with not one but two exits. Xbox pioneer and Courier design lead J Allard is leaving his position as a senior VP but will stay onboard as an advisor reporting directly to CEO Steve Ballmer. Robbie Bach, the head of the Entertainment and Devices Group, is also leaving the company after 22 years.

The shift will see Ballmer take more control over the E&D group and have both the individual Windows Phone and Xbox teams report directly to the CEO. Company veteran and Live Platform VP David Treadwell will move to the company's core technology group inside the Interactive Entertainment side of the E&D division, which focuses primarily on the Xbox.

In a memo to staff, Ballmer characterized both departures as voluntary, with Bach retiring. Allard in an interview denied rumors that the move had anything to do with the cancellation of the Courier. He wants to pursue extreme sports and "musings in my head," according to his statements to TechFlash.

While spun as a natural evolution of the company, the claims contradict multiple rumors that have since proven at least partly accurate, which claimed that Ballmer was frustrated with Microsoft's competition against Apple and Google in the device space. E&D has lately been profitable, but almost exclusively based on Xbox performance; the Zune and now-separate Windows Phone divisions have so far been unable to gain market share. Windows Phone has endured a steady slide roughly coinciding with the arrival of the iPhone and has only seen that accelerate as phone builders have increasingly chosen Android over Windows Mobile for a licensed mobile OS.

Many had suspected that the Courier tablet was targeted at what was eventually to become the iPad, but its simultaneous confirmation and cancellation suggested Microsoft was unhappy with its development before it got to a near-finished stage. Insiders claimed that Ballmer no longer thought the dual-screen journal had potential to compete against Apple where Allard had wanted to see it through to production.